DOL Moves to Dismiss Opinion in Morgan Stanley Deferred Pay Dispute

The U.S. Department of Labor and other federal officials urged a federal judge in Manhattan to dismiss a lawsuit brought by former Morgan Stanley financial advisers who are challenging a DOL advisory opinion that the firm has used to defend itself in arbitration over canceled compensation.

In a filing in the U.S. District Court for the Southern District of New York in the complaint, Steve Sheresky, et al. v. United States Of America, et al., government lawyers argued that the plaintiffs—former Morgan Stanley advisers seeking deferred incentive pay—lack legal standing to challenge the agency’s advisory opinion and cannot pursue their claims under the Administrative Procedure Act. 

The motion to dismiss marks the latest development in a long-running dispute over whether certain Morgan Stanley compensation programs fall under the Employee Retirement Income Security Act. 

The U.S. Justice Department, representing the DOL and other federal officials, contends that the advisory opinion at issue carries no binding legal force and therefore cannot cause the kind of concrete injury necessary for the plaintiffs to sue. 

Government lawyers said the former advisers can contest the opinion directly in the arbitration proceedings, where the compensation dispute is being litigated.

The case concerns a DOL advisory opinion issued in September 2025 stating that Morgan Stanley incentive compensation plans were a bonus program that does not qualify as pension plan under ERISA.

The plaintiffs include three former Morgan Stanley advisers—Steve Sheresky, Jeffrey Samsen and Nicholas Sutro—who argue the DOL opinion harms them because Morgan Stanley has relied on it in arbitration to argue that ERISA does not govern the firm’s deferred pay arrangements. 

But government lawyers said the opinion merely expresses the agency’s view based on facts provided by the company and has no legal effect on its own. The filing also argues that plaintiffs claiming harm based on the arbitrators’ interpretation is speculative. 

Background on the Dispute

The lawsuit, which has been litigated for years, stems from the termination of deferred incentive compensation that the advisers say they were owed when they left Morgan Stanley.

The advisers contend the compensation plans qualify as ERISA-covered pension plans, which would limit an employer’s ability to cancel benefits. 

Morgan Stanley disputes that characterization, saying the plans are bonus programs designed primarily to reward performance and encourage retention.

Two of the plaintiffs were previously part of a proposed class action filed in 2020 that challenged the same compensation structure. That case was later sent to arbitration, where similar claims are now being pursued individually. 

Morgan Stanley sought the DOL’s advisory opinion in 2024, and after reviewing materials submitted by the firm, the department concluded the programs appeared to fall outside ERISA’s pension-plan definition and fit within the regulatory exemption for bonus programs. 

‘Final’ Agency Action Question

The DOJ also argues that the advisory opinion cannot be challenged under the Administrative Procedure Act because it is not a “final agency action” and has no direct legal consequences. 

If the court agrees, the dispute over Morgan Stanley’s compensation plans will likely continue primarily in arbitration, where dozens of former advisers are contesting the firm’s cancellation of deferred compensation.

In those proceedings, arbitrators—not federal regulators or judges—will decide whether the compensation arrangements are governed by ERISA.

Rosca Scarlato LLC, Ajamie LLP and Motley Rice LLC represent the plaintiffs.